The main problem with Paypal is that it's too easy to initiate a charge-back.
With a credit card charge-back, the buyer generally needs to be mailed a form to sign; then the matter is investigated. It can take months to resolve. With Paypal, it can be done electronically.
Also, Paypal is notorious about siding with buyers on disputes involving virtual goods (i.e. electronic goods and services). Even if the merchant successfully overcomes the dispute, the time and effort needed are a hassle.
If you ask merchants who deal in intangible (i.e. electronic) goods and who accept Paypal where the vast majority of their charge-back requests come from, the majority will tell you Paypal, and it isn't close.
